NEW YORK (GenomeWeb) – Wells Fargo Securities today downgraded shares of Agilent Technologies to Market Perform, saying the company's stock is already trading at a premium.
The investment bank also lowered the valuation range on Agilent's stock to between $41 and $43 from a previous range of $57 to $59.
The downgrade from a previous rating of Outperform follows the completion of the spinoff of Agilent's electronic measurement business called Keysight Technologies, which resulted in a 26 percent retreat in Agilent's shares on Monday. In a note, Wells Fargo analyst Tim Evans said that the bank's Outperform rating was based on the potential for multiple expansion and for upside surprises to earnings following the spinoff.
"We believe both of those items are now off the table," he said. Evans added that Agilent has provided financial projections for fiscal 2015 — including a revenue range of between $4.15 billion and $4.25 billion and EPS of between $1.73 and $1.77 — and with currency effects anticipated to create headwinds against the company, "those projections are more likely to move down than up."
Agilent's shares are currently trading at a 10 percent premium to its peers, including Danaher, Waters, and Bruker, he said, and some of that may be on speculation that Agilent could be an acquisition target. "While we believe the takeout thesis has merit and is an upside risk to our current downgrade, we prefer to base our valuation and rating on fundamentals," Evans wrote.
He estimated Agilent's fiscal 2014 revenues at $6.98 billion and its non-GAAP EPS from continuing operations at $3.05. Agilent is scheduled to release its fourth quarter and fiscal 2014 financial results after the close of the market on Nov. 17.
In afternoon trading today on the New York Stock Exchange Agilent's shares were down 2 percent at $40.02